Gas prices likely to fall despite Sandy's havoc

[November 01, 2012]  WASHINGTON (AP) -- When a storm the size of Sandy hits the country's most populous area, you'd think it would drive up gas prices.

Not this time.

Sandy's trail of havoc in the Northeast might cause temporary price spikes and long lines at gas stations in storm-ravaged areas, but the rest of the country has decent supplies at a time of year when demand is normally low, industry analysts say. And that means a continuation of falling prices that began early in October.

Demand for gas is likely to slide even further because people in New Jersey, New York and adjoining states won't be traveling as much.

"You've got cities that are shut down, people not going to work, people not moving around," said Phil Flynn, senior market analyst for the Price Futures Group, an independent futures broker. "There's so much demand that is not happening."

Although Sandy hit coastal areas hard, only two of the region's nine refineries have been knocked out, and they don't produce enough gas to make much of a difference nationally, said Tom Kloza, chief oil analyst at the Oil Price Information Service.

What could cause problems is the lack of power at giant oil storage tanks and pipelines around New York Harbor, which take in gas from tankers and distribute it to other parts of the country. Without power to move supplies, stockpiles of gasoline could be crimped. But Kloza doesn't think that will last too long.

"The country should not have any kind of an issue," he said. "New Jersey, Long Island, downstate New York, they'll have issues, but they'll mostly be related to lack of power."

Bottom line: Gas prices in much of the country soon should drop toward $3 per gallon or even below that between now and when demand picks up around Thanksgiving, Kloza said.

On Wednesday, the national average for a gallon of gas fell a penny to $3.52.

Gasoline futures spiked more than 20 cents in the morning as traders feared that supplies would become tight. But by afternoon, the gains faded, and prices ended up 3.3 cents to finish at $2.7618 per gallon.

There were lines at stations in the hardest-hit areas. On Long Island, where power was out in most places, 30 cars lined up Wednesday morning at a Citgo station in Rockville Centre, N.Y., which had power in its central business district. There were 50 cars waiting at a nearby Gulf station in the afternoon. By evening, the Citgo and a nearby Mobil were out of gas, but the Gulf station still was pumping.

"It's all about power right now," Kloza said.

Benchmark crude rose 56 cents to finish at $86.24 per barrel in New York. Brent crude, which is used to price international varieties of oil, fell 38 cents to finish at $108.70 per barrel in London.

In other trading:

• Heating oil fell 1.84 cents to finish at $3.0682 per gallon.

• Natural gas rose less than a penny to finish at $3.692 per 1,000 cubic feet.

[Associated Press; By TOM KRISHER]

AP Editor Paul Harloff in Rockville Centre, N.Y., and business writer Sandy Shore in Denver contributed to this report.

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